- Kiwi lifts as Chinese yuan strengthens
- Dairy prices bounce in 2026
- USD pressured after Greenland tariff threat
- Breakout puts cycle highs in play
Summary
Technicals have combined with improving economic data, firming dairy prices, a stronger Chinese yuan and a U.S. dollar under pressure to send the New Zealand dollar hurtling higher, seeing the Kiwi resemble a rocket rather than a flightless bird. With the price action and momentum entirely bullish, the prospects of NZD/USD scaling fresh cycle highs look to be improving even with faltering risk appetite.
Bullish Factors Combine
It is unlikely many traders would have nominated the Kiwi as the top performing G10 FX currency this week when Donald Trump’s Greenland tariff threat hit the wires over the weekend, but that is exactly what has played out with a variety of external factors working in its favour.
As seen in the graphic below, as the Kiwi has rallied against the USD, so too has the Chinese yuan with a correlation of 0.89 between the two over the last five trading sessions. Dairy prices, proxied by whole milk powder futures traded on the NZX, have also bounced strongly in 2026.
Source: TradingView
But perhaps the biggest factor has been recent weakness in the U.S. dollar sparked by something akin to a mini ‘Sell America’ 2.0 episode in the wake of the Greenland tariff threat. Even though it would only be used as a last resort, the counter threat posed to the U.S. from the EU triggering its anti-coercion instrument is clearly weighing on the greenback, sparking a shift in capital out of U.S. assets pre-emptively should tensions escalate.
Kiwi Data Turning Higher…Quickly
At the margin, domestic considerations are also helping the Kiwi’s cause, with Monday’s strong manufacturing PMI print of 56.1 in December followed up by a 51.5 read for the PSI, New Zealand’s services equivalent. The expansion in activity was the first since February 2024, doing little to deter the view that after 225 basis points of rate cuts from the RBNZ, monetary policy easing is now helping to fuel an economic recovery.
Even with excessive labour market slack, given the current trajectory, do not rule out the prospect of an inflation acceleration, bringing forward the possibility of a hike from the RBNZ as early as Q3 this year. Stranger things have happened, and a 25 basis point hike by July is now marginally favoured by swaps traders.
NZD/USD Testing Resistance Zone
Source: TradingView
Combined, these factors have contributed to the bullish breakout in NZD/USD seen this week. The pair is now testing the June 2025 downtrend, with 0.5843 resistance and the key 200-day moving average located overhead. During previous bullish runs, the Kiwi has struggled around these levels, but the downtrend break, the price action since, and momentum indicators are undeniably bullish, making the chances of this move extending to cycle highs as good as any.
Should the price break and close above the 200-day moving average, 0.5881, 0.5915 and 0.6000 are the levels to watch. On the downside, a reversal from these levels would put 0.5800 or 50-day moving average in play.
RSI (14) is trending higher above 50 but not yet overbought, delivering a bullish momentum signal which has been confirmed by MACD which has delivered a bullish crossover and is also pushing higher.
